UPSC Prelims 2024·GS1·economy·money and banking

With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of:

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Last updated 23 May 2026, 3:31 pm IST
  1. ABond market
  2. BForex market
  3. CMoney marketCorrect
  4. DStock market.

Explanation

"Collateral Borrowing and Lending Obligations" are instruments primarily used in the **money market**. The money market deals with short-term borrowing and lending with maturities typically up to one year. Collateralized borrowing and lending refers to transactions where funds are borrowed or lent against the pledge of securities (like government bonds, treasury bills, or other debt instruments) as collateral. This reduces the risk for the lender. Examples include repo and reverse repo operations, collateralized lending under the Liquidity Adjustment Facility (LAF) by the RBI, and interbank lending against collateral. * **Bond market:** Deals with long-term debt instruments (bonds). * **Forex market:** Deals with the exchange of currencies. * **Stock market:** Deals with the trading of equity (shares). While collateral can be used in other markets (e.g., for margin trading in stock markets), the specific phrase "Collateral Borrowing and Lending Obligations" typically refers to short-term, often overnight, transactions in the money market for liquidity management.
economy: With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of
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